Banks wish to predict the probability an account will default if the economy turns down. In addition, from January 2018 almost every bank in the world has to predict the expected future cash flow from each loan if the risk associated with its repayments changed after the loan had been made. This was required under an International Accounting Standard IFRS9 and the US Financial Standards Board's CECL. These requirements posed major challenges to banks.
The research on hazard models by members of the Credit Research Centre has given banks, other lenders, and regulators a methodology to make these predictions, and the methodology expressed in these papers is being used by banks throughout the world.
Contributors
Professor of Business Economics, Deputy Dean and Director of Research